*This report was replaced in its entirety by the Department of Medical Assistance Services on October 15, 2025.

The Virginia Department of Medical Assistance Services (DMAS) engaged Guidehouse to conduct a comprehensive rate study of 11 services under the Commonwealth’s Medicaid 1915(c) Home and Community-Based Services (HCBS) waivers for individuals with intellectual and developmental disabilities (I/DD). These services include Community Coaching, Community Engagement, Companion Care, Independent Living Supports, In-Home Support Services, Personal Assistance, Private Duty Nursing, Respite Care, Skilled Nursing (including Congregate Nursing), Therapeutic Consultation, and Workplace Assistance. Services included in this study were identified in the Permanent Injunction (Civil Action No. 3:12-cv-59-JAG), which outlines compliance expectations for Virginia’s DD service system.

In alignment with the Injunction’s requirements that “the rate study shall be in accordance with best practices and designed to target rates necessary to ensure sufficient capacity to reach the goals of paragraphs 33 [therapeutic consultation services], 37 [day/community engagement services], 38 [private duty nursing services], 39 [skilled nursing services], and 48 [training and competency of direct support professionals]," the study aimed to assess the adequacy of current reimbursement rates and develop benchmark rates that appropriately reflect the cost of delivering high-quality services. The analysis was grounded in provider-reported data, the Commonwealth’s state administrative data, publicly available labor and economic benchmarks, and peer state comparisons. Stakeholder engagement was central to the process, with input gathered through a Rate Advisory Workgroup, a Therapeutic Consultation Focus Group, and listening sessions with individuals with lived experience and their families. The Rate Advisory Workgroup included providers, provider associations, advocacy groups, DMAS staff, Department of Behavioral Health and Developmental Services (DBHDS) staff, legislative representatives, and other state agency officials. Over five sessions, the Rate Advisory Workgroup reviewed Provider Cost and Wage Survey (“Provider Survey") design, rate methodology, and preliminary analysis, findings, and recommendations, and provided feedback on key cost assumptions such as wages, benefits, supervision, and staffing ratios.

Methodology and Key Findings

Guidehouse employed an independent rate build-up methodology, which analyzes service costs into transparent components including direct care wages, employee-related expenses, supervision, administrative and program support costs, and geographic adjustments. The study incorporated data from 109 provider surveys, representing 19 percent of expenditures or $77.1 million for services in scope.

Key findings that informed the development of State Fiscal Year (SFY) 2027 proposed benchmark rates include the following observations:

• Direct care baseline wages reported in the provider survey were higher than Virginia wages for most job types and lower for a few compared to Virginia wage data publicly available from the federal Bureau of Labor Statistics (BLS). Higher wages in themselves are not an indicator of rate adequacy but must be interpreted within the context of total compensation, considering many providers may continue to pay higher wages to maintain minimum market competitiveness even when forced to trim benefit offerings to contain overall service costs. In most cases, Guidehouse benchmarked rates using the more competitive wages derived from the provider survey, while further incorporating inflation and supplemental pay adjustments to project benchmark wages for SFY 2027.

• Employee-Related Expenses were calculated to reflect a competitive benefits package, averaging 30.35 percent of wages for direct support professionals. Benefit benchmark recommendations are not based on what providers offer today but on what they would need to be able to offer to support competitive staff hiring and retention.

• Productivity adjustments and staffing ratios were standardized across applicable services to reflect non-billable time, group service delivery models, and participant resource needs.

• Geographic cost differentials were applied using Economic Policy Institute data, resulting in a 16.8 percent overall difference between Northern Virginia and the Rest of State.

• SFY 2027 benchmark rates for all 11 services are projected to increase compared to the implemented SFY 2026 rates. The percentage change across individual service components and tiers ranges from 0.5 percent to 63.8 percent, with an average increase of 20.7 percent across all services.

Fiscal Impact and Recommendations

The proposed benchmark rates are projected to increase total expenditures from $657.5 million in SFY 2026 to $839.9 million in SFY 2027, a 27.7 percent increase. The corresponding state share is estimated to rise by $91.0 million.(*1) The largest fiscal impacts are associated with Personal Assistance, In-Home Support, and Private Duty Nursing services, which together account for 82.1 percent of the projected increase. The proposed SFY 2027 benchmark rates and fiscal impact represent estimates based on the rate study; the actual rates will be determined by DMAS based on the funding appropriated for the services.

Guidehouse offers the following recommendations for DMAS’s consideration:

• Adopt a modular rate build-up approach to implement proposed benchmark rates, enhance transparency, and enable targeted updates to rate components in the future.

• Implement a regular rate review process using publicly available inflation indices and labor market data to maintain rate adequacy.

• Update geographic differential methodologies to reflect current economic conditions using standardized, publicly available data.

• Develop a provider cost reporting program to support future rate reviews and compliance with the “80/20 rule" of the CMS Access Rule (Final Rule: Ensuring Access to Medicaid Services; CMS-2442-F), which requires that at least 80 percent of Medicaid payments for certain services be directed to direct care worker compensation.
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(*1) Virginia’s Medicaid SFY 2027 blended FMAP is 50.1 percent, which means the federal government will cover 50.1 percent of expenditures for standard Medicaid services, with Virginia’s state share covering the remaining 49.9 percent of reimbursement costs.